Innovation Victoria posts $165.8m surplus as election axe looms

Innovation Victoria booked a $165.8 million operating surplus in FY2026 — its best result yet — weeks before a state election the Coalition has promised will kill the fund off.

The state-owned venture investor finished the year with $824.2 million in net assets, up 36% on 12 months earlier. Assets under management grew 41%, and expenses were cut by 32%. The turnaround is stark: a year ago the fund, then called Breakthrough Victoria, scraped a $200,000 operating surplus but finished $5.7 million in the red after investment revaluations and adjustments. Its third year, FY24, delivered a $3 million loss and handed critics their opening arguments for shutdown.

The Labor government merged Breakthrough Victoria with LaunchVic in July to create Innovation Victoria. The annual results landed just weeks before the November 28 election, in which Opposition leader Jess Wilson has pledged to wind up the fund and sell the investment portfolio, claiming the savings will fund elective surgeries.

What did the fund actually achieve?

Victorian Labor launched the vehicle in 2021 to back research commercialisation, drive innovation, and plug gaps in early-stage capital. It recently committed another $10 million to the Alice Anderson Fund for women founders.

Over five years as Breakthrough Victoria, the fund committed $529.3 million across 103 investments — stakes in startups and venture funds, plus a $25 million grant for Melbourne's Jumar Bioincubator. The agency said its portfolio attracted more than $1.8 billion from other public and private investors. That's roughly $3.40 of external money pulled in for every $1 the state committed.

In his first full financial year as CEO, Rod Bristow said the fund "has demonstrated the power of patient capital to attract private investment, commercialise research and grow globally competitive companies." Pointing to a recent strategic collaboration with AI chip maker Nvidia to accelerate AI adoption and scale local AI-native companies, Bristow added that "Innovation Victoria has unmatched ability to support innovation at every stage, from an idea in a university lab or founder's garage through to global scale and economic impact."

The FY25 results put the portfolio's internal rate of return at 21.9%, ahead of the median for Australian, US and European VC funds from the 2021 vintage. One caveat for practitioners: that IRR isn't a dividend to taxpayers. It includes the value of investments the state still owns. Capital actually returned over five years was put at $83.7 million as of June.

What do the exits tell us?

The two FY26 exits — both US companies — were described only as "profitable" in the report, with no dollar contribution disclosed.

Quantum computing company Infleqtion listed on the NYSE in February. The fund's $29 million stake was worth five times the original investment when opening-day trade closed — a market price, not a sale price.

Stratospheric balloon maker World View was acquired by Nasdaq-listed Ondas in April, in a mostly scrip deal worth around US$150 million. Breakthrough Victoria's biggest and most controversial bet — $37 million tipped in during May 2024, amid accusations the near-space business was on shaky ground — converted into 3,341,927 Ondas shares held for resale, per a subsequent US filing. Timing mattered: Ondas shares peaked above US$13.50 in early June, then halved to US$6.32. Selling at the peak would have delivered around A$60 million.

What does the election change for the fund?

Plenty. The Liberals look likely to return to power after 12 years of Labor rule, and Wilson's wind-up pledge now sits against the fund's strongest numbers. In September, shadow finance minister Bridget Vallence put the savings from shutting the fund at $1.27 billion over a decade; the surgery program the Liberals say it will fund costs $1.27 billion over four years — a mismatch critics will keep probing.

A forced sale carries its own risk: offloading the portfolio could mean discount prices, shortchanging Victorian taxpayers. Vallence's figures also exclude what the $2 billion fund has helped create — Victorian jobs, businesses, and medical research startups working to improve healthcare and cut its cost.

Melbourne ranks third globally for startup creation growth, with startup employment up 86% since 2020. More than 68,000 people now work in Victorian startups. Whether that ecosystem keeps a state-backed patient-capital partner depends on how Victorians vote on November 28.